Energy Future Plans to Make Upcoming Debt Payment, Sources Say

Mike Spector and Emily Glazer broke the news on Oct. 30 that the Texas utility at the center of a record private-equity buyout plans on making a key debt payment that would stave off one of the largest-ever bankruptcy filings until next year. Energy Future Holdings Corp. is likely to pay roughly $270 million owed to bondholders at Texas Competitive Electric Holdings Co., the company’s unregulated subsidiary that sells power in a competitive wholesale market.

Here is how the story appeared on DJX:

Oct 30, 2013

6:11 p.m. ET

*Energy Future Plans to Make Upcoming Debt Payment, Sources Say

6:11

*Energy Future Plans Would Forestall Bankruptcy Filing, Sources Say

6:11

*Energy Future Plans Could Still Shift, Sources Say

6:23

Energy Future Plans to Make Upcoming Debt Payment — Sources

By Mike Spector and Emily Glazer

The Texas utility at the center of a record private-equity buyout plans on making a key debt payment that would stave off one of the largest-ever bankruptcy filings until next year, said people close to the situation.

Energy Future Holdings Corp. is likely to pay roughly $270 million owed to bondholders at Texas Competitive Electric Holdings Co., the company’s unregulated subsidiary that sells power in a competitive wholesale market, the people said.

If the payment is made as planned, Energy Future, formerly called TXU Corp., likely won’t file for bankruptcy protection until at least early 2014, the people said.

The payment isn’t due until Friday, so the company could change course and seek bankruptcy protection if it reaches a last-minute deal with creditors on a prearranged restructuring plan, the people said. But the company’s board met throughout the day Wednesday and was leaning toward making the payment, they said.

It is also possible the company will make the payment later than Friday during a grace period, some of the people said, but such a move could create other consequences the company would have to reckon with.

Energy Future would continue operating normally after making any debt payment while trying to continue discussions with creditors, one of the people said. The company has $1.3 billion in cash and additional funds available under a letter-of-credit facility, and doesn’t face any huge debt maturities until Oct. 2014, according to regulatory filings.

The Dallas power company tried to get a wide array of creditor groups to agree to a streamlined bankruptcy plan so it could seek Chapter 11 protection in the coming days instead of making the payment, but has yet to strike a deal on how to rework the company’s $40 billion-plus debt load, the people said.

Auditors could deliver an opinion expressing doubt about the company’s ability to continue as a going concern sometime next year, which would trigger a debt default that could force Energy Future to seek bankruptcy protection, the people said.

KKR & Co. (KKR), TPG and Goldman Sachs Group Inc.’s (GS) private-equity arm took TXU private in 2007 for $32 billion plus about $13 billion in assumed debt. The buyout firms thought natural-gas prices would rise and allow the company to charge more for electricity. Instead, prices fell and the company lost billions of dollars.

The buyout firms are angling to retain an ownership stake in Energy Future on the other side of any bankruptcy reorganization in the hopes they can salvage some of their investment. The $8 billion they and other buyers put into the deal has been written down to nearly zero.

Senior lenders owed more than $20 billion at Texas Competitive Electric could play a role in whether the buyout firms get their wish. The lenders don’t want to see the $270 million debt payment made because the money goes to creditors ranked below them for repayment in the event of a bankruptcy filing.

The result is the lenders, unhappy about a payment, could drive a harder bargain in future negotiations with the company and its private-equity owners, and perhaps be less open to the buyout firms’ retaining any equity in the utility, according to a person involved in the discussions.

Still, there is little they can do about a payment, since Energy Future isn’t in default on any debts and contractually owes the money to those other creditors.

Energy Future has been trying to get the lenders and other bondholders to agree to a far-reaching deal for reworking the company’s debts in the hopes that various subsidiaries can reorganize under bankruptcy protection at the same time.

Absent a deal soon, the company could face the prospect of putting Texas Competitive Electric into bankruptcy early next year without other subsidiaries, triggering a possible breakup of the company. In addition to Texas Competitive Electric and the parent company, Energy Future owns Energy Future Intermediate Holding Co., a subsidiary that owns a regulated business called Oncor that delivers power to consumers.

Write to Mike Spector at mike.spector@wsj.com and Emily Glazer at emily.glazer@wsj.com

Email *Please fill in the required field. By clicking submit, I agree to the Privacy Policy and Cookie Policy and I understand I will receive marketing communications from Dow Jones professional information products from which I may unsubscribe using the links provided.

Thank you

Thank you for subscribing, your information has been submitted successfully.